You are in talks to settle a potential lawsuit. The defendant has offered to make annual payments of $15,000, $25,000, $40,000,

Question

3 years ago

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You are in talks to settle a potential lawsuit. The defendant has offered to make annual payments of $15,000, $25,000, $40,000,

and $60,000 to you each year over the next four years, respectively. All payments will be made at the end of the year. If the appropriate interest rate is 3.7 percent, what is the value of the settlement offer today?

Mathematics

1 answer:

Sphinxa [80] · Answer 1 · 2021-12-09T05:44:35+03:00

Answer:

All payments will be made at the end of the year by using the present value of inflows

Step-by-step explanation:

Present Value Of Inflows = Cash Inflow × Present Value Of Discounting Factor (Rate%,Time Period)

Present Value Of Inflows = $15000/1.037$ + $25000/1.037^{2}$ + $40000/1.037^{3}$ + $60000/1.037^{4}$

Present Value Of Inflows = 125466.3